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Thomas Piketty's "Sensational" New Book

Tyler Durden's picture




 

Submitted by Hunter Lewis via The Mises Economic blog,

This 42 year economist from French academe has written a hot new book: Capital in the Twenty-First Century. The US edition has been published by Harvard University Press and, remarkably, is leading the best seller list, the first time that a Harvard book has done so. A recent review describes Piketty as the man “who exposed capitalism’s fatal flaw.”

So what is this flaw? Supposedly under capitalism the rich get steadily richer in relation to everyone else; inequality gets worse and worse. It is all baked into the cake, unavoidable.

To support this, Piketty offers some dubious and unsupported financial logic, but also what he calls “a spectacular graph” of historical data. What does the graph actually show?

The amount of U.S. income controlled by the top 10% of earners starts at about 40% in 1910, rises to about 50% before the Crash of 1929, falls thereafter, returns to about 40% in 1995, and thereafter again rises to about 50% before falling somewhat after the Crash of 2008.

Let’s think about what this really means. Relative income of the top 10% did not rise inexorably over this period. Instead it peaked at two times: just before the great crashes of 1929 and 2008. In other words, inequality rose during the great economic bubble eras and fell thereafter.

And what caused and characterized these bubble eras? They were principally caused by the U.S. Federal Reserve and other central banks creating far too much new money and debt. They were characterized by an explosion of crony capitalism as some rich people exploited all the new money, both on Wall Street and through connections with the government in Washington.

We can learn a great deal about crony capitalism by studying the period between the end of WWI and the Great Depression and also the last twenty years, but we won’t learn much about capitalism. Crony capitalism is the opposite of capitalism. It is a perversion of markets, not the result of free prices and free markets.

One can see why the White House likes Piketty. He supports their narrative that government is the cure for inequality when in reality government has been the principal cause of growing inequality.

The White House and IMF also love Piketty’s proposal, not only for high income taxes, but also for substantial wealth taxes. The IMF in particular has been beating a drum for wealth taxes as a way to restore government finances around the world and also reduce economic inequality.

Expect to hear more and more about wealth taxes. Expect to hear that they will be a “one time” event that won’t be repeated, but that will actually help economic growth by reducing economic inequality.

This is all complete nonsense. Economic growth is produced when a society saves money and invests the savings wisely. It is not quantity of investment that matters most, but quality. Government is capable neither of saving nor investing, much less investing wisely.

Nor should anyone imagine that a wealth tax program would be a “one time” event. No tax is ever a one time event. Once established, it would not only persist; it would steadily grow over the years.

Piketty should also ask himself a question. What will happen when investors have to liquidate their stocks, bonds, real estate, or other assets in order to pay the wealth tax? How will markets absorb all the selling? Who will be the buyers? And how will it help economic growth for markets and asset values to collapse under the selling pressure?

In 1936, a dense, difficult-to-read academic book appeared that seemed to tell politicians they could do exactly what they wanted to do. This was Keynes’s General Theory. Piketty’s book serves the same purpose in 2014, and serves the same short-sighted, destructive policies.

If the Obama White House, the IMF, and people like Piketty would just let the economy alone, it could recover. As it is, they keep inventing new ways to destroy it.

 

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Wed, 04/23/2014 - 21:08 | 4688779 ILLILLILLI
ILLILLILLI's picture

Well, damn! Just when we finished up on our new line of guillotines...

Wed, 04/23/2014 - 21:45 | 4688908 Spigot
Spigot's picture

Who would have thought that a French trained thinker would love the notion of government being the answer to "wealth inequity". How shocking!

Wed, 04/23/2014 - 23:30 | 4689212 puckles
puckles's picture

Aside from that, Picketty is describing an effect, which he describes as deriving from one cause, which is ludicrous in and of itself, even if we actually did have a semblance of capitalism left in the West. Western-and indeed, virtually any modern-society is far too big and diverse to be captured by a single economic platform for any length of time in the modern era, and thereby show an effect.

There is, however, another far more plausible explanation, one that spans centuries, races, and societies. Essentially, if your  xx-grandpapa made it fairly big way back when, and married the daughter of someone similar (sound familiar?), your descendants will ascend, provided that they keep on doing the same.  After a number of generations, the effect appears relatively unassailable, although there is a (very slight) reversion to the mean--but from a truly ridiculously high level.

It has just been given a thorough study in Gregory Clark's The Son Also Rises  (from Amazon): 

The Son Also Rises: Surnames and the History of Social Mobility (The Princeton Economic History of the Western... by Gregory Clark (Feb 23, 2014)

Basically, if you ain't got the genes, you can fuhgeddabouddit...And no program whatseover will fix it.  He argues, in many ways much like Picketty, alas, for a negative income tax, accordingly.  I would argue that gene therapy might in the end have some effect...but it might not be long lasting.


Thu, 04/24/2014 - 01:47 | 4689399 whotookmyalias
whotookmyalias's picture

Well, any douche can publish a book. But it takes a special douche to think that a corrupt crony government is the solution to a problem caused by a corrupt crony government and a corrupt crony central bank system.

Thu, 04/24/2014 - 07:14 | 4689714 N2OJoe
N2OJoe's picture

This is the kind of book you publish when you hope to head the IMF, FED, ECB some day.

Thu, 04/24/2014 - 08:13 | 4689890 myptofvu
myptofvu's picture

Just substitute the word 1% with the word Jew and you got yourself a case of full blown plagiarism.

Thu, 04/24/2014 - 04:55 | 4689531 SAT 800
SAT 800's picture

Yes, isn't it. Let's just call it Fraudulent Crap, and move on.

Wed, 04/23/2014 - 22:36 | 4689086 TheReplacement
TheReplacement's picture

Time for everyone with an Amazon account to head on over and leave a review of that book.  Put some sunlight on that festering pustule.

Wed, 04/23/2014 - 21:10 | 4688792 NoDebt
NoDebt's picture

"Absolute power is a hell of a drug"

Paraphrasing Rick James.

Wed, 04/23/2014 - 21:18 | 4688824 Luckhasit
Luckhasit's picture

Absolute power and cocaine go hand and hand.  

Wed, 04/23/2014 - 21:34 | 4688875 Anusocracy
Anusocracy's picture

Absolute power and absolutely no conscience seem to be the norm.

Wed, 04/23/2014 - 21:11 | 4688794 Prairie Dog
Prairie Dog's picture

If Piketty read Zero Hedge, he'd be smarter. This is where the smart people hang out!

Wed, 04/23/2014 - 22:37 | 4689089 TheReplacement
TheReplacement's picture

Anyone who is a professional economist for 42 years and isn't on his own island with a harem of honeys is obviously not very good at it.

Wed, 04/23/2014 - 21:11 | 4688799 Aussiekiwi
Aussiekiwi's picture

bugger, missed being first again.

Wed, 04/23/2014 - 21:12 | 4688804 fonzannoon
fonzannoon's picture

This dude needs to connect his two thoughts and realize that...

"If the Obama White House, the IMF, and people like Piketty would just let the economy alone..."

Interest rates would rise

leading to

"investors have to liquidate their stocks, bonds, real estate, or other assets"

and that is why his ridiculous "it would recover" conclusion is absurd. It's extend and pretend from here till it's all over, one way or the other.

 

 

 

 

Wed, 04/23/2014 - 21:20 | 4688833 Grande Tetons
Grande Tetons's picture

Amen! 

That yield curve is not going horizontal by accident. 

Wed, 04/23/2014 - 21:27 | 4688854 fonzannoon
fonzannoon's picture

once rates skyrocket and the global equity and credit markets implode leads to vanishing capital everywhere and of course the failure of TBTF banks and their depositors leads to global currency failures leads to world war as well as civil war, naked americans on meth attacking each other for a tic tac leads to the big die off of about 6 billion people, give or take a few billion......we will recover, learn how to make fire, reinvent the wheel and indoor plumbing, and culminate with fractional reserve banking and then we can start the clock ticking until rates skyrocket again. That is the new economic cycle and the recovery this author is talking about

Wed, 04/23/2014 - 21:30 | 4688866 Grande Tetons
Grande Tetons's picture

You strike me as a glass is half empty kinda guy. 

Wed, 04/23/2014 - 21:31 | 4688869 fonzannoon
fonzannoon's picture

I admit I've been in a raw mood lately.

Wed, 04/23/2014 - 21:36 | 4688882 Grande Tetons
Grande Tetons's picture

Making sense of this shit show will do that to a guy. That, or spending to much time with the in laws. 

Wed, 04/23/2014 - 23:10 | 4689169 seek
seek's picture

It's hard not to be in a mood these days, Fonz.

Wed, 04/23/2014 - 21:38 | 4688881 CrashisOptimistic
CrashisOptimistic's picture

This is the ZH great reset narrative.

Sorry.  Nope.

When all gets smashed and you have 1 billion people left, and they remember they used to drive tractors to grow food, but now there's no available oil because 1 billion isn't enough to get to that really difficult oil anymore.

And never will be, because without those tractors there won't be enough food to grow the population.

Then time passes and natural disasters start to whittle down that 1 billion, until . . .

zero.

How's that for half empty.

Wed, 04/23/2014 - 21:41 | 4688898 fonzannoon
fonzannoon's picture

I can always count on you to make me feel like I am full of unbridled enthusiasm.

Wed, 04/23/2014 - 21:51 | 4688930 CrashisOptimistic
CrashisOptimistic's picture

It's just a gift I have.

Wed, 04/23/2014 - 22:02 | 4688963 NoDebt
NoDebt's picture

My kids are asleep now.  Should I just go smother them with a pillow or like what do you suggest exactly?

 

Thu, 04/24/2014 - 07:41 | 4689796 pmbug
pmbug's picture

Time to begin TEOTWAWKI training.  Have they seen The Road Warrior yet?

Wed, 04/23/2014 - 23:04 | 4689147 Matt
Matt's picture

You skipped the part where, due to lack of oil to power the diesel generators, the spent fuel ponds all boil dry and go critical.

Even then, do you really think the end result is zero population?

Thu, 04/24/2014 - 00:43 | 4689320 Stockmonger
Stockmonger's picture

Fuck you Bernanke and Krugman for causing the EXTINCTION OF THE HUMAN RACE!

Thu, 04/24/2014 - 02:48 | 4689440 Serenity Now
Serenity Now's picture

Good grief, Crash, he did say six billion people are going to die.  Give him a break.  LOL.

;)

Thu, 04/24/2014 - 10:02 | 4690399 Renewable Life
Renewable Life's picture

George Carlin had me at hello with his schtick once that started with "humans are like cockroaches"...........

If you think a billion humans couldn't figure out how to "get to the oil" left on this planet, if they knew it lead to mass consumption and privatized prosperity for those that successed in doing so, your stark raving mad son!!!!

Not only would they get to the oil, they'd streamline the process in 5 years and have the satellites back up and reruns of "dancing with the stars" pumping to every one of the two billion smartphones they would turn back on, in a flash!!!

Human nature is veracious when unbridled, the problem is, we have "breed" 4-5 billion, miss-educated, entitled, confused, slacker humans into our current system on this planet, and forgot who we are!!!

Wed, 04/23/2014 - 22:15 | 4689017 Greenskeeper_Carl
Greenskeeper_Carl's picture

don't ever let anyone accuse you of being an optimist, fonz...

Wed, 04/23/2014 - 22:20 | 4689037 fonzannoon
fonzannoon's picture

there truly is no optomism or pessisism. just realism. those who wear a smile for an umbrella get their ass soaking wet.

Thu, 04/24/2014 - 02:50 | 4689443 Serenity Now
Serenity Now's picture

That's the spirit!  LOL.  :)

Thu, 04/24/2014 - 08:08 | 4689879 snr-moment
snr-moment's picture

True, but you'll have income equality again. That's all that matters.

Wed, 04/23/2014 - 21:23 | 4688844 Zirpedge
Zirpedge's picture

Thank you, we need more regulations not less. (awarding you my first up vote)

A well regulated market is for the public good.

Wed, 04/23/2014 - 22:19 | 4689033 Greenskeeper_Carl
Greenskeeper_Carl's picture

"if there i ever a question of rather or not you live in a police state, ask yourself if those who are charged with enforcing the laws are able to break said laws without consequence"

paraprashed from someone much smarter than me

Wed, 04/23/2014 - 23:37 | 4689221 Big Brother
Big Brother's picture

Post hoc ergo propter hoc fallacy much?

Wed, 04/23/2014 - 21:14 | 4688807 Shizzmoney
Shizzmoney's picture

RE

If the Obama White House, the IMF, and people like Piketty would just let the economy alone, it could recover. As it is, they keep inventing new ways to destroy it.

These folks did leave the economy alone....by letting the fraudster bankers continue to milk America and the Western World for every last nickle.  Why do you think the DOW is currently at infinity?  Because taxes went up on rich people (where they actually went up on middle and lower class people!)?  No, it's because the Fed is printing money to banks at 0%, while HFT manipulates via extend and pretend every single asset that they feel is important for looks and their friends, as well as hedge funds/corporations continuing to circumvent democracy in EVERY corner of the world.

In the end, this has NOTHING to do with tax rates.  The tax rates and the inequality of it is a result of an immoral, corrupt, disgusting, and ass backwards system.  And anyone who currently defends it by calling this current "market" a "free" one is either a) dumb, b) deaf, c) blind, or d) bought off.

What will happen when investors have to liquidate their stocks, bonds, real estate, or other assets in order to pay the wealth tax?

This "tax" will never happen because a) the owners of the politicians have paid GOOD money to ensure that it never happens (and even if it does, they'll just do what the Russian Oligarchs did in Cyprus: BTC their assets and leave) and b) thankfully for us, IMO, the "market" will completely liquidate at some point.  Every single dollar in "wealth" thee assholes own is going to dissapear in plumes of smoke.  AND WE SHOULD ALL EMBRACE IT. 


Wed, 04/23/2014 - 22:15 | 4689015 Sean7k
Sean7k's picture

If eveyone has their capital/land/wealth taxed it will go to pay the debt, yes? Now, WHO OWNS THE DEBT? Piketty is a moron's moron. You would concentrate everyone's wealth into the hands of the holders of the debt- Bankers and the extreme wealthy. This just a huge wealth transfer and just because the government will do the collecting doesn't mean we will share in the winnings. 

Worse, there will be room to borrow moar!

Humans are terminally stupid.

Wed, 04/23/2014 - 23:06 | 4689153 Matt
Matt's picture

Are the wealthy really the largest holders of government debts, or is it social security, pensions, and their international equivelents?

Thu, 04/24/2014 - 07:16 | 4689718 Sean7k
Sean7k's picture

Central banks are ALL private corporations, as are private banks. All those treasuries belong to them or China, Russia, etc. The FED holds over 19 trillion in debt instuments, which does not count our 17 trillion dollar debt. Now, think globally. 

Thu, 04/24/2014 - 00:48 | 4689327 trader1
trader1's picture

if govt. nationalizes the banks and/or buys out the debt from the extreme wealthy, then does this not become the people's winnings?

we the people decide what the govt. does, right?

 

Thu, 04/24/2014 - 07:21 | 4689733 Sean7k
Sean7k's picture

You really think we the peope decide anything? How quaint. The IMF plan calls for a wealth tax to pay down debt to "manageable levels" (30-40% of GDP). So, farms, apartments, rentals, homes, business property and capital, etc. Get the picture? Now, do you really think the wealthiest people will not hide their money in protected places? 

Fri, 04/25/2014 - 02:29 | 4694052 trader1
trader1's picture

does it matter what i think?

or does it matter what the critical mass thinks?  

critical mass seems fine with the present situation though...[nsfw]

Thu, 04/24/2014 - 05:57 | 4689572 Liberty2012
Liberty2012's picture

Shizzmoney,

Taxes are a fundamental part of it. Taxes are a direct theft of work.

The government imposed monopoly fiat fractional reserve system is the indirect theft of work.

The elaborately ornate massive regulatory system is the method of doling out favors to some while squelching the rest.

Taxes and regulation are not inherently bad. They can be good as long as they are clear and limited. Even fractional reserve is not inherently bad. It would be okay if it was not forced and if it was clear to all what it really is. People would pay a lot more attention to how their "deposits" work.

Modern slavery involves theft of work and theft of choice. All slavery requires fear. Even slavery begins with something good: work. It's the twisting and perversion that leads to trouble.

Most people are decent and do not want slavery - it's the complex lying and misrepresentation that has resulted in so many being both slaves and slave drivers simultaneously.

Wed, 04/23/2014 - 21:19 | 4688830 Zirpedge
Zirpedge's picture

It is true that top earners do not contribute a proportionate share of "earning". Capitol gains should be taxed proportional to all other taxes on labor.

\Also, I think land taxes should be invigorated to spur land holders to "shat or get off the pot" pardon my french. We need to foster productive use of the land and not reward holders of said property for using it inefficiently as a tax write off. Land is the commons from which all productive tax income should derived for the social good.

Wed, 04/23/2014 - 21:46 | 4688912 pods
pods's picture

Tax on labor is slavery.

Be careful what you wish for, for you just might get it.

pods

Wed, 04/23/2014 - 21:23 | 4688843 Seasmoke
Seasmoke's picture

French. HA HA HA. Oui. Oui. Oui.

Wed, 04/23/2014 - 21:24 | 4688846 Luckhasit
Luckhasit's picture

What our best selling douche failed to mention is that capitalism needs/should  have checks and balances. The shit he's talkin bout is crony capitalism, see how Cuba enjoyed that shit before Castro rose to power.

Besides, when its a best seller, it means that it requires the comprehension of a ninth grader, which is where the american public's reading skills are at.

Wed, 04/23/2014 - 21:47 | 4688917 pods
pods's picture

People are going to buy this book to put it front and center for cocktail parties so others know how smart they are.

pods

Thu, 04/24/2014 - 01:19 | 4689371 Luckhasit
Luckhasit's picture

Heh.  You always make me laugh pods.  You and the crew have made me so much smarter, I'm actually dangerous now.  If only I wasnt broke, busted and disgusted.

Wed, 04/23/2014 - 21:43 | 4688887 williambanzai7
williambanzai7's picture

Before everyone attacks this guy Piketty for being yet another run of the mill socialist, I suggest we all evaluate his observations, which in the past twenty minutes I have found interesting to say the least. Particularly the notion that we are moving back into a period dominated by patrimonial wealth. A global economy controlled by familial dynasties. Sounds like Marcos-ism

As much as I hate socialism/communism, I found Marx's initial observations concerning capitalism to be quite interesting. Particularly since a fair aount of what he predicted has basically come to fruition. The same probably holds true for Piketty. Better to examine his findings, before jumping to conclusions about what should be done.

I doubt one needs hundreds of pages to explain what has happened. 

I suggest that looking at the world economy as a super charged version of a crony capitalist state is the best analytical approach to pursue. This is ultimatley what enables the accute disparity of wealth that we now have.

There is no political governance. Simply a machine rigged to execute inputs which are designed improve the relative position of the entitled ones. We know them as the Davos Class.

And that part of the machine dedicated to "capital formation" (the Central Banks), as we all know, is obviously a disguised artifice for massive wealth transfer. 

The Central Banks, that is the moon that the finger is pointing to. Stop looking at the finger!

Wed, 04/23/2014 - 21:52 | 4688932 pods
pods's picture

WB, I like reading people who speak about problems and causes in an analytical and pragmatic fashion.

When they start in on solutions is where I cringe.

Everyone around can see how the wealthy are accumulating more and more, while the rest of us fall behind.

But they then offer up solutions like government taxation and such which will never work because governments were made FOR (or shaped into so) these people to keep their wealth.

pods

Wed, 04/23/2014 - 22:02 | 4688965 williambanzai7
williambanzai7's picture

Yes there are no easy solutions. However, we now see what happens when we give the foxes free reign over the chicken farm. And the situation is not improving one iota.

Wed, 04/23/2014 - 22:28 | 4689053 Sean7k
Sean7k's picture

Why was Marx correct? Because, as a pet zionist, he knew exactly what would happen when capitalism was zionized (TM). We don't practice capitalism, never have. We have used parts (the parts the wealthy like) and we have excluded the rest (free markets, minimum government/taxes). 

There is an easy solution: NO LAW. Law is the tool of oppression, it protects the criminals and enslaves the honest man. There is no set of benefits from law that begin to outweigh the tyranny it enables and breeds.

Piketty is a puppet and like Keynes, will be well rewarded.

Thu, 04/24/2014 - 08:19 | 4689911 csmith
csmith's picture

Yes...the "solutions" are all backward.

Make the Davos crowd COMPETE instead, and we're all better off.

The solution to inequality (as Pikety's own data show) is letting rich people fail.

Wed, 04/23/2014 - 21:52 | 4688933 fonzannoon
fonzannoon's picture

I'm only attcking his lazy conclusion that "the economy would recover if we just leave it alone". that ship sailed a long time ago and if he has half a brain he knows it.

Wed, 04/23/2014 - 22:04 | 4688968 Anusocracy
Anusocracy's picture

It should have said recover sooner.

There is no fixing it, just whether you want to be recovering or in an ever increasing decline in the near future.

Wed, 04/23/2014 - 21:57 | 4688944 Anusocracy
Anusocracy's picture

The choice is simple: either you're going to have a fucked-up world forever or you're going to get rid of government.

Getting rid of government is equivalent to ants giving up their ant colony. Not likely.

So let's start a movement for choice in government - panarchism.

Wed, 04/23/2014 - 21:59 | 4688950 Grande Tetons
Grande Tetons's picture

I find it odd that his book in number one. Out of the blue so to speak.  Is he KYing the sheep before the deep penetration? 

Honey, I read this French guy's book. Trust me, this tax we are going to have to take up the ass will feel really good. 

Wed, 04/23/2014 - 22:00 | 4688958 williambanzai7
williambanzai7's picture

I imagine that this book is currently a favorite among the young educated unemployed in Europe. No small wonder. They are sitting around in cafes with plenty of time to read and discuss. 

Wed, 04/23/2014 - 22:08 | 4688980 Grande Tetons
Grande Tetons's picture

The barriers to entry to the young educated class ain't what they used to be. 

Debate has become seek vindication. 

Wed, 04/23/2014 - 23:42 | 4689228 Wait What
Wait What's picture

+1 maybe the best thing i read today, but i would alter it to read 'seek validation'

too many ppl insecure about their opinions until they are confirmed by peers.

Wed, 04/23/2014 - 22:09 | 4688986 Icewater Enema
Icewater Enema's picture

Or is this one of those situations like Hammer & Champy 20 years ago where they send everyone in the firm (or in this case the administration) out to buy 500 copies each. Voila - best seller. 

Wed, 04/23/2014 - 22:14 | 4689008 Grande Tetons
Grande Tetons's picture

That, and they were able to buy this unconventional best seller during all of this bad weather. 

My life bending over. The Myley Cyrus Story. 

 That, is a best seller that has legitimacy in this fucked up world. 

Wed, 04/23/2014 - 22:18 | 4689030 Luckhasit
Luckhasit's picture

Well of course.  One only has to look at the Walmart heirs to see how it really goes down.  From Rockerfellar, to Johnson and Johnson.  As Carlin said, "Its a big club and you aint in it."

Wed, 04/23/2014 - 22:30 | 4689062 williambanzai7
williambanzai7's picture

A big club indeed

Wed, 04/23/2014 - 22:35 | 4689081 williambanzai7
williambanzai7's picture

I see that Krugturd is effusive with praise for this book, that cannot be a good sign...

It also explains his new $25,000 a month CUNY gig. Let's call it the Wealth Disparity Business.

Wed, 04/23/2014 - 22:47 | 4689113 TheReplacement
TheReplacement's picture

Marx did not predict anything about capitalism.  He predicted human nature.  Human nature happened to the Soviets too, just faster.  It doesn't matter what system you have, human nature will destroy it.  It just happens that capitalism and representative government are the best options compared to everything else that's ever been tried.

Wed, 04/23/2014 - 23:49 | 4689235 Prairie Dog
Prairie Dog's picture

"Marx did not predict anything about capitalism." 

er, I beg to differ with that statement. The expropriators will be expropriated?

 

I love Zero Hedge. It's where the smart people come!

 

Wed, 04/23/2014 - 23:11 | 4689173 the grateful un...
the grateful unemployed's picture

Marcos-ism? pardon me while i throw one of Imeldas shoes at the podium

Thu, 04/24/2014 - 09:36 | 4690258 BigInJapan
BigInJapan's picture

Willambanzai. If you hate communismsocialism so much, why is it you never EVER have a bad word to say about China?
What is your country of residence again? Oh yeah... China!

Wed, 04/23/2014 - 21:38 | 4688889 dirtbagger
dirtbagger's picture

What a shit review of the book - about what you would expect from the Mises crowd.  Piketty says that over time capital is appreciating at 5-6% each year while labor income is not appreciating at all.   Eventually most of the money is in the hands of a few rentier class.   Most of us learned this at about age 8 or 9 on the Monopoly board.

That is why taxing labor at 39% and capital gains at 20% turbocharges the transfer of wealth.

Wed, 04/23/2014 - 21:50 | 4688925 chunkylover42
chunkylover42's picture

so why does the conversation always revolve around taxing capital at a higher rate rather than labor at a lower rate to make the two equal?

Thu, 04/24/2014 - 00:50 | 4689330 trader1
trader1's picture

because the ratio of existing capital stocks to annual net labor income flows is above 1.

Wed, 04/23/2014 - 22:17 | 4689025 j8h9
j8h9's picture

THis is not a review of a book but a slam from the Liberterian gold sellers at Mises. First, look who published the piece, research them to gain a better knowledge of the slant the article may contain. You people living in rural areas collecting snap should be supporting this Picketty guy 100%

Wed, 04/23/2014 - 22:23 | 4689040 Grande Tetons
Grande Tetons's picture

You people living in rural areas collecting snap should be supporting this Picketty guy 100%

Not a big demograhic around here at ZH. 

Wed, 04/23/2014 - 22:47 | 4689112 Sean7k
Sean7k's picture

Dirtbagger, you need to ask WHY they are appreciating or staying the same. Which capital?  It is a complex set of variables that have a lot to do with money and credit creation. Is capital appreciating or is excess liquidity driving up values in a worthless currency? Unless you are adding value, ALL ASSET CLASSES LOSE VALUE, it is called depreciation. However, if you CONTROL the money and credit, you can direct it to the places you want.

You are arguing about increasing taxation, which kills investment and thus employment suffers or moves to places with cheaper labor rates. The trick is to ELIMINATE taxation or minimize the State to the degree it can no longer make winners out of losers.

Wed, 04/23/2014 - 22:49 | 4689117 TheReplacement
TheReplacement's picture

How much value have precious metals lost in the last 100 years?

Thu, 04/24/2014 - 07:42 | 4689805 Sean7k
Sean7k's picture

I would argue pm's are not an asset class per se, but money. Further, currency is NOT money, but a debt instument. The controllers of the financial system use one to diminish the memory of the other, but they don't seem to be able to kill it. For the US, the Constitution keeps silver and gold alive, for others trust. I just wish we would remember how clear the Constitution is on this matter.

Wed, 04/23/2014 - 21:42 | 4688893 SilverIsMoney
SilverIsMoney's picture

Its a shame these idiots cant see the connection to gold...Hunter is spot on here and its an even bigger shame my fellow ZHs cant see it.

Wed, 04/23/2014 - 21:45 | 4688909 Yes_Questions
Yes_Questions's picture

 

 

Stupid.

 

The article is attempted RED Meat for drones programmed to defend an ism.

 

and most isms are just pre-packaged beliefs dependent on flocks of the converted.

 

Think for yourself and see these axiomatic isms fade from significance.

 

 

Wed, 04/23/2014 - 21:51 | 4688928 kurt
kurt's picture

Here, I agree with the book. Fuck 'em.

That's what they've been saying to me and mine.

Wed, 04/23/2014 - 21:51 | 4688929 disabledvet
disabledvet's picture

Is it "diplomacy is working" or "i'm all for diplomacy" here?

Sounds like a minor I difference here...but i get the feeling...you know..."this is like diplo-speak."

Like in Star Trek when they say "we come in peace!" to the Populace then tell their "away team" (quietly) to "set phasers to the maximum setting."

Wed, 04/23/2014 - 21:57 | 4688943 NakedEconomics
NakedEconomics's picture

I want you to get up right now, sit up, go to your windows, open them and stick your head out and yell...

 

'I'm as mad as hell and I'm not going to take this anymore!'

Wed, 04/23/2014 - 22:10 | 4688993 Walt D.
Walt D.'s picture

We all know how his policies would work (or not work). We only need to look at farming in the old USSR. Farmers were paid a fixed amount for their crops. Needless to say, they only produced to minimum amount to meet their quota - no point in putting in extra work to grow more. You can get more equality in the USSR system - everone works for the government.

Wed, 04/23/2014 - 22:10 | 4688995 WMM II
WMM II's picture

"..... when in reality government has been the principal cause of growing inequality."

 

disagree.

 

reality is that to distinguish between government and their owners, the wealthy, is like analyzing banks while ignore the shadows.

 

:)

Wed, 04/23/2014 - 22:13 | 4689005 booboo
booboo's picture

THe Federal Government after WW1 and WW2 commisioned and spent a great deal of money hiring select "writers" and "historians" that would put on paper just what the the power brokers wanted future generations to believe about the "cause" as well as the "cures" of these wars.  Even after the death of Lincoln newspapers still critical of that fucking tyrant and his policies were put on notice, look at how America fawns over that cocksucker still and if the truth about him ever went mainstream people would tear down that marble shitstain on the mall.

Wed, 04/23/2014 - 22:14 | 4689009 Omegaman2211
Omegaman2211's picture

Anarcho-capitalism cannot be refuted.

Thu, 04/24/2014 - 07:50 | 4689831 Sean7k
Sean7k's picture

Sure it can. It has one glaring problem, it continues to maintain laws and contracts. As long as laws exist, they will be manipulated to create favorable outcomes. 

Now, separate the two ideas. Elimnate law/government- that is the anarchy part. Allow commerce to progress without law in any form that is coercive. Capitalism may remain, but it will shed its' thuggish reputation. 

Liberty is how the rest of the creature kingdoms live. It is fraught with danger, but still preferable to slavery. Slavery is the result of law.

Wed, 04/23/2014 - 22:14 | 4689012 j8h9
j8h9's picture

If you know the Mises crows and what they are about, this slam of picketty is expected. Are they selling gold over there? I know one of their founding fathers ran a big PM selling company.

 

Wed, 04/23/2014 - 22:16 | 4689023 Walt D.
Walt D.'s picture

Perhaps the French should try working in August - that would at least raise their income levels. The average French worker gets more paid vacation than Obama.

Wed, 04/23/2014 - 22:24 | 4689046 drendebe10
drendebe10's picture

Wonder if i can get a job in France cuz i sure cant find one here thamks to the fudge packer in chief.

Wed, 04/23/2014 - 22:17 | 4689026 Itchy and Scratchy
Itchy and Scratchy's picture

Here's a wild and crazy notion. Lets cut the size of our pristine government in half and reduce costs & taxes for everybody. And while we are at it ... Let's not let them spend more than they take in AND let's make our fearless leadership responsible and liable for their boneheaded decisions. Nahhhh .... I didn't think you'd like it.

Wed, 04/23/2014 - 22:28 | 4689058 navy62802
navy62802's picture

The pre-supposition of course, is that this is capitalism. Nothing could be further from the truth. We have a centrally planned economy in which the federal government colludes with major private businesses in order to control wide sectors of the economy. This is fascism. This is the very definition of Mussolini-style fascist economics. No one wants to be so brazen as to call it what it is ... but that is precisely what it is. It is not capitalism.

Thu, 04/24/2014 - 00:29 | 4689298 sushi
sushi's picture

Ding, Ding, Ding.

We have a winner!!

Check out the work of Sheldon Wolin. He makes precisely the same claim.

 

http://en.wikipedia.org/wiki/Inverted_totalitarianism

 

Thu, 04/24/2014 - 00:48 | 4689328 sushi
sushi's picture

Link to an article by Wolin:

 

http://www.thenation.com/article/inverted-totalitarianism

 

He makes the argument that we need to separate democracy and governance. To speak of a "Democratic State" does not make sense as "democracy" is a partipatory activity by the population while the state is a mechanism for enforcing order. The two entities are as different as water and oil.

We can see this most clearly in the events at Bundy Ranch.

The democratic process was represented by the coming together of citizens who sought to frustrate the enactment of unjustified state power. The mechanism for the enforcement of order (the state, or US government in the Bundy case) had been corrupted by the actions of Harry Reid and son who, if press accounts are correct, had the intent to turn a profit on BLM grazing land through the resale of rights to a Chinese solar power firm. This process was abetted by the fact that the BLM manager involved was a former staffer of Reid's. Essentially these individuals managed to turn the coercive power of the state to their own financial advantage.

Contemplate this same process in regard to the actions of the Fed and the banksters and it is clear that there is group which is profiting handsomely from the current economic malaise. But the reason for this is not a failure of capitalism and will not be resolved by the expedient measure of higher taxes.

Of course the state and its patrons are never going to buy into this analysis. The "system" is terminally broken and the issues unlikely to be resolved without a complete collapse. And this is the outcome forecast by Marx.

 

Thu, 04/24/2014 - 00:52 | 4689333 trader1
trader1's picture

part of the solution is to eliminate/dampen mass consumerism and for people to do more physical in addition to mental labor.

 

Wed, 04/23/2014 - 22:32 | 4689074 I Write Code
I Write Code's picture

Great post.

One can see why the White House likes Piketty.

Cuz it sounds like what an undergrad learns about Marxism, which is about the main view Obama has of things.

This post makes the point that "crony capitalism" is not really capitalism.  At the risk of falling into the "no true Scotsman" fallacy, I agree.  There were more lessons that SHOULD have been learned as recently as 2008 which can easily be taken as criticism of capitalism, our modern banksterism is a semi-new invention, at least in the details, but apparently Piketty (not that I've read it, I haven't) is more Marxist classic.  But wait!  From the amazon.com entry:

Defies left and right orthodoxy by arguing that worsening inequality is an inevitable outcome of free market capitalism…[It] suggests that traditional liberal government policies on spending, taxation and regulation will fail to diminish inequality…Without what [Piketty] acknowledges is a politically unrealistic global wealth tax, he sees the United States and the developed world on a path toward a degree of inequality that will reach levels likely to cause severe social disruption. Final judgment on Piketty’s work will come with time--a problem in and of itself, because if he is right, inequality will worsen, making it all the more difficult to take preemptive action. (Thomas B. Edsall New York Times 2014-01-28)

Well, I agree with him this much, that income (wealth) inequality is already a problem and getting worse and needs to be addressed by government forces - mostly the government SHOULD STOP CAUSING IT!  He sounds French, and academic - smart and clever, overreaching and confused.  Academics are generally far stronger at analysis than at prescription.  Global wealth tax my global ass.

 

Wed, 04/23/2014 - 23:07 | 4689159 Catullus
Catullus's picture

I'm still missing the actual sound economic analysis of why inequality is such a horrible thing. Specifically wealth inequality and income inequality. Not some nuanced socio-political yammerings. Actually economic analysis.

If you had some person who was 5000x more efficient that most people, how much should that person be paid? What if that person was 5000x more efficient at growing crops, procuring energy, building shelters. Would you just say "fuck off, no way we're paying your a dime over the next mouth breather next to you"?

Sure, over time he's going to accumulate a lot of wealth if you compensate him for his work. And I'm sure some covetous little shit will sneer at him. But that's all this "inequality" and "imbalances" discourse in economics has ever been really about. It's the political economy of envy. And Marxism is its embodiment wrapped in fantasy land mythology.

Wed, 04/23/2014 - 23:25 | 4689202 j8h9
j8h9's picture

Peter Schiff, the best-selling author and CEO of Euro Pacific Capital, says “the crisis is imminent… we’re broke [the US]… we owe trillions [US public debt is around 17.5 trillion to date]. Look at our budget deficit; look at the debt to GDP ratio, the unfunded liabilities. If we were in the Eurozone, they would kick us out.” [Money Morning] Schiff predicted the 2007 meltdown and believes that the 2008 stock market collapse “wasn’t the real crash. The real crash is coming. … And it will be worse than the Great Recession.” It is a view shared by others, including Robert Wiedemer, best-selling author of The Aftershock Investor, who points out the so-called recovery is “100 per-cent fake.”

Wed, 04/23/2014 - 23:37 | 4689223 Prairie Dog
Prairie Dog's picture

How many wrong facts can you get in one paragraph? Brilliant!

Thu, 04/24/2014 - 00:11 | 4689268 Atticus Finch
Atticus Finch's picture

A good smear, but can you pin point what's wrong and provide evident data? Otherwise, anyone can smear anyone else by dismissing them as a Conspiracy Theorist, all the while ignoring actual findings and evidence.

So, what data do you have? Otherwise, your comments a drivel.

Wed, 04/23/2014 - 23:54 | 4689242 Prairie Dog
Prairie Dog's picture

Have you read the book?

Thu, 04/24/2014 - 00:08 | 4689263 Atticus Finch
Atticus Finch's picture

Corporations aren't 5000x more efficient. The are 5000x bailed out. Anyway have you actually read Das Kapital?

Thu, 04/24/2014 - 03:53 | 4689496 Serenity Now
Serenity Now's picture

Catullus,

There is no such thing as economic analysis of ANYTHING anymore.  The truth is that inequality is a fact of life.  PEOPLE ARE NOT EQUAL.  (I'm not yelling at you, just in general).  People are not equal, have never been equal, and will never be equal.  

Equality is the religion of the Left.  Class warfare is pure Marxism.  We are inundatd by it now, and I don't know if we'll ever break free.  

I don't believe in equality.  I know that I'm smarter than some, dumber than others.  More talented than some, less so than others.  Prettier than some, uglier than others.  It's life.  There is no way on earth to make those things equal.  And the same is true for economic equality.

Thank you for your comment.  I feel alone in the fight against class warfare on this website.  (Note that they never talk about Hollywood or sports stars when it comes to income inequality....only "other" rich people.)

Thu, 04/24/2014 - 07:01 | 4689697 SubjectivObject
SubjectivObject's picture

From within the unequals, where comes from a principle that unequals should not take advantage of other's ignorance or lack of power?

 

Thu, 04/24/2014 - 07:23 | 4689741 Ayr Rand
Ayr Rand's picture

Catullus, I am no fan of government-enforced wealth equality (aka communism), but where is the person who is 5000x more efficient at growing crops, procuring energy, building shelters? The maximum difference is 10x, and in reality Bill Gates is only about 40% smarter than the average smart guy, but 10,000x richer. But I digress. 

The practical reality is that the wealth inequality is causing a huge and growing proportion of the population to be idled. This is mainly the people who previously occupied the lower rungs of employment and which were replaced by automation or whose skills are simply so obsolete there is no place for them. It also includes in my experience some talented engineers who are now over-priced for the deflationary market. But it really doesn't matter who it includes. The effect is to create huge transfer payment (social security, medicaid, etc.) costs that are increasing far faster than GDP. This will overwhelm the system. And since those receiving benefits are now the majority of the voters, they are unlikely to scale back. Plus, scaling back means that all the retirees and others benefitting would be in effect thrown into the street. (Not all, we all know millionaires enjoying their social security and medicare benefits, but you get the picture.)

Yes, employment levels today as a % of the population are far below 2007 not to mention 1999. We would need 10M more jobs instantly to match the employment levels of 2007. People are moving out of the labor force 3-5x as fast as the birth rate (which is my proxy for people moving into the labor force). Who will feed these non-working people?

Prepare for some social disruption until the "great leaders" who devised this system make it stable. That will happen by making those who reaped the benefits pay, starting some new pandemic that will curiously afflict poor or old people disproportionately, or breaking and remaking the system. The latter is sedition, which I personally do not recommend. 

Thu, 04/24/2014 - 09:45 | 4690291 j8h9
j8h9's picture

Very good post. "That will happen by making those who reaped the benefits pay" = RAISING taxes on the 1%. Read Pickerttys book...

Wed, 04/23/2014 - 23:18 | 4689191 teslaberry
teslaberry's picture

it's insufficient to read assisnine repetitive criticism of 'keynseian' philosophy as if such a thing actually was a philosphy, let alone the underlying reason that these policies exist. 

 

the underlying reason these policies exist is desire for power. 

 

these articles are unacceptable. acceptable treatment of runaway currency destruction include discussion of banksterism, corporotacrcy, trade diplomatic and financial war, WAR against the classes that might plunder and scavenge whatever is left once the rats leave the ship, to the offshore and deep continental shelters and bunker estates..

 

tired of academic 'objectivity' regarding a subject that is not academically rooted. tired of treatments regarding the 'rationalizations'. 

Wed, 04/23/2014 - 23:24 | 4689201 Wait What
Wait What's picture

funny thing all these 'bring back capitalism!' yay! capitalism!' 'let the free markets roar!' cheerleaders neglect in their ignorant, demagoguery filled heads is that the capitalism they desire has never really existed. study a little economic history and all you will see is government in the pocket of elites, and government purses pillaged for the benefit of powerful economic interests. how they can be fool enough to rail against Piketty's equally sensationalistic foolishness using the dichotomy of capitalism vs socialism is almost mind boggling. capitalism has and will always be crony capitalism, because humans are hard-wired to favor friends over 'market participants'. all this talk of 'redistribution' and 'wealth tax' only obfuscates the most important point: what are we going to do when this game resets? what system is going to rise in place of the failures we have in place now? no one has an answer because everyone is still thinking in terms of a capitalist-socialist-fascist spectrum, instead of coming up with something that doesn't periodically eat itself alive.

Thu, 04/24/2014 - 07:12 | 4689712 SubjectivObject
SubjectivObject's picture

Any objectivistic exercised limits for capitalism have to be rooted in an understanding of necessary limits on selfish aspects human nature.  I'm not sure how to get that started though.  There will never be an in words perfect system for human economic interaction, a right balance of freedoms and constraints, but authentically impartial "leaders" are needed to implement/manage whatever compomise that can be made.  Within the current survival-self-interest culture that we have, it's a fact that impartial leaders are normally killed, in the press or otherwise.

Thu, 04/24/2014 - 14:15 | 4691623 Wait What
Wait What's picture

i think it starts with radical behaviorism. B.F. Skinner and his intellectual progeny provided the foundations on which an understanding of how humans interact, and why, leads directly to a system like the one you begin to outline. humans are little more than animals with good memories for influences, motivations, and desires. understand those and you begin to weed out the people unfit for governance. we certainly don't have a shortage of data from which to analyze all of this, especially now.

but, yes, none of this will happen until the big reset, when the fog of chaos and crumbling of information channels finally ends the hegemony of the culture you describe.

Wed, 04/23/2014 - 23:28 | 4689208 the grateful un...
the grateful unemployed's picture

some people call it wealth redistribution, but i haven't seen the original distribution plans

i dont think obama gives a crap about working people, so if you think he is some sort of closet 1920s socialist i think you have a real problem

a short history lesson: when business could not make a profit in europe in the 30s, they stopped producing. then the fascists said we can make the trains run on time. in america it was slightly different, farmers plowed under their crops and they were foreclosed for taxes, (because of price controls) now what is bernanke doing with credit? price controls. people notice Nixon took us off the gold standard but he also implemented price controls, and every potus since then has toyed with the idea, until finally we gave it to the federal reserve, and said, why dont you just enforce price controls on money and credit?

when the producer is unhappy with the price he gets for something he stops selling which is why when the price of gold drops the available supply vanishes.

Thu, 04/24/2014 - 00:04 | 4689252 Atticus Finch
Atticus Finch's picture

It's not Capitalism but entitlement given to those with Capital by the government creating an Oligarchy and Kleptocracy, neither of which is Capitalism.

An Oligarchy has arisen principally in Central Banks and Transnational Corporation and Governments through collusion, which has created an entity distinctly different from Capitalism.

Through lending, not intended to increase productive capacity, but to drive the borrower into bankruptcy so that international banks and corporations can acquire all the assets, natural resources and means of production in every sovereign country.

In Capitalism, banks fund productive enterprise. That's not what is going on. Banks are lending to acquire the world's existing assets through loan default and Austerity until they own the entire material world. That is not Capitalism.

I suggest reading John Perkins', Confession of an Economic Hit Man. "Naomi Klein's, "Shock Doctrine". and Michael Hudson's,"Super Imperialism" for some eye opening reading.

Wed, 04/23/2014 - 23:59 | 4689253 LetsGetPhysical
LetsGetPhysical's picture

WE DON"T LIVE IN A CAPITALIST SOCIETY. full stop. Stop blaming one systems failures on another system. Call it what you will, but capitalism it is not. I'll refer you to plank #5. 

Thu, 04/24/2014 - 01:49 | 4689402 zipit
zipit's picture

Socialism for the rich. (Privatize profits, socialize losses.)

Thu, 04/24/2014 - 03:04 | 4689456 Serenity Now
Serenity Now's picture

The problem with books/theories like this is that they start with a false assumption:

That we live in a society in which poor/middle class/wealthy categories are static.  Not true.  They are dynamic.

The truth is that about 70% of us will at some point in our lives be in the top 20%.  I don't remember the other statistics about the top 10% and the top 1% (obviously those groups are smaller).  The point is that rich people can and do lose wealth, the poor can and do move up into middle class and beyond, and the middle class can and does become richer and poorer.  There is no such thing as a permanent economic class in America.

I'm sure I will get a lot of down arrows for this post, but I don't care.  Class warfare is a Leftist evil, and I detest it.  

Thu, 04/24/2014 - 03:47 | 4689489 maneco
maneco's picture

Should we assume he will be giving away all the proceeds from his "sensational" book to the French Government? After all he already earns a salary from academia so why would he need any more money?

Thu, 04/24/2014 - 05:51 | 4689566 justsayin2u
justsayin2u's picture

Lemme see.  Do the right thing and live frugally and save for retirement and the government wants to tax your hard earned wealth to spend on more wastefull, inefficient government programs and overpaid federal workers?  Could these assholes fuk things up any more?

Thu, 04/24/2014 - 07:10 | 4689708 esum
esum's picture

libtards are like giving a lamborghini to a drunk child who drives it at redline ..... into a brick wall.... when in the hands of an adult it cruises at 200 mph and takes 1g turns... get the child out of the WH before he hits the wall.... impeach the incompetent turd.. come nov. change of regime.... 

Thu, 04/24/2014 - 07:36 | 4689785 AnAnonymous
AnAnonymous's picture

Economic growth is produced when a society saves money and invests the savings wisely. It is not quantity of investment that matters most, but quality. Government is capable neither of saving nor investing, much less investing wisely.
__________________________________________________________________________

'Americans' trying to cover tracks...

People who saved in this 'american' world were the types of the Indians who did not consume the required resources. That is how 'american' societies have grown: by stealing the environment of people who failed to consume it as fast as 'americans' could do.

These were the only mattering savings as they exist in an 'american' world.

People in power, included 'americans' in power must deal with reality. They cant do like this 'american' propagandist sycophant. They must take reality into account, and apply recipes according to their cultural background.

'Americans' apply 'american' recipes and that includes heading for central Asia, the only place in the world left with some resources yet to be acquired by 'americans'

They cant lull themselves asleep with cheap propaganda like growth was enabled by saved money.

Thu, 04/24/2014 - 07:46 | 4689818 AdvancingTime
AdvancingTime's picture

Few people ready understand the economy. The study of economics is often baffling and confusing. Many economic theories exist but many are full of holes and conundrums. Much of how people react to a policy may have to do with timing and perception instead of reality. Economics is full of loops that feed back upon themselves and unexpected pitfalls based on expectations.

All this can become quite abstract. Economist predict events that never tend to unfold as expected or planned. Many of the "modern monetary theories" in use today have not been proven over time, but reflect an attitude that we can control  economic cycles better than in the past. We shall soon see if that is indeed true. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/03/few-people-really-understand-econ...

Thu, 04/24/2014 - 07:57 | 4689853 AdvancingTime
AdvancingTime's picture

The crux of our economic woes lay in the fact that over the last several decades we have created entitlement societies on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances. Promises were made on the assumption that those advantages would continue in both Europe and US, and that ever greater prosperity and entitlements would be sustained through debt financed consumption growth.

In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about ever more growth. Now reality has begun to come into focus and it is becoming apparent that this is unsustainable. The entitlements and promises that have piled up have become overwhelming. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/11/the-crux-of-our-economic-woes.htm...

 

Thu, 04/24/2014 - 08:20 | 4689910 paint it red ca...
paint it red call it hell's picture

Mr. Frye runs our local full service gas station, at 92 he works everyday and employees 5-7 service attendants. His sign out front announces "No Beer, No Lottery". His station is of the highest order and likely the last one of its kind in the metro area. An old leatherneck, he served in WWII as a Marine Corpsman on that nightmare called Iwo Jima.

He told me of pulling Marine bodies and remnants of bodies from that island for longer than he cared to recall. Then he wondered aloud over the current plight of the US asking rhetorically, "And what was it all for?"

So I ask on his behalf, "What was it all for?"

Banker ends justifying banker means?

Thu, 04/24/2014 - 09:40 | 4690270 Itchy and Scratchy
Itchy and Scratchy's picture

Nothing more than a once proud and determined Empire quickly coming to an end! Just one of a number of great civilizations rolling over & submerging in a sea of greed, lust, and avarice! Nothing special or unique.

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